Japan said on Tuesday it will provide $60 billion in loans to the International Monetary Fund, becoming the first non-European nation to commit money to boost the fund's financial firepower to contain the euro zone debt crisis.
Finance Minister Jun Azumi said Japan hoped Tokyo's contribution, which will be formally announced at a Group of 20 financial leaders' meeting later this week, will encourage other countries to follow suit.
Indeed, IMF Managing Director Christine Lagarde was quoted as saying she hoped to secure government agreements this week to raise the IMF's funds by more than $400 billion, about two-thirds of the amount the Fund had said in January it would need.
I really hope this week we'll reach the critical mass of more than $400 billion. We are determined to do all we can, she was quoted as telling Italy's main financial newspaper Il Sole 24 Ore, though she also said finally sealing the funds might take a bit longer.
Japan's announcement comes ahead of the IMF and World Bank Spring Meeting and a G20 finance leaders' gathering in Washington, which run from Friday to Sunday.
Following a series of euro zone's policy responses, it is important to strengthen IMF funding and pave the way for ensuring an end to the crisis not only for the euro zone but also for Japan and Asian countries, Azumi told a regular news conference after a cabinet meeting.
I am confident that many other countries will pledge contributions to the IMF, he said.
The IMF, which acts as a lender of last resort for governments, said in January it would need $600 billion in new resources to help innocent bystanders who might be affected by economic and financial spillovers from Europe.
Lagarde said last week the IMF might not need as much money as it had thought because economic risks had waned. G20 officials told Reuters the world's major economies were likely to agree to provide between $400 billion and $500 billion.
I am grateful for Japan's leadership and strong commitment to multilateralism, and I call on the broader fund membership to follow Japan's lead, Lagarde said after Japan's pledge.
Japan's $60 billion pledge takes overall commitments to about $310 billion. Euro zone countries have committed about $200 billion and other European Union nations an additional $50 billion.
But the United States, heading towards a presidential election in November in which the country's hefty budget deficit is a key topic, has said it won't offer new funds.
Canada has insisted it is not interested in contributing to a fund to bail out Europe, which it says has enough of its own resources to deal with the crisis.
Other economies, including major emerging markets China, Brazil and Russia, have said they are willing to chip in but were looking to get more voting power in return. Azumi said he consulted with Chinese Vice Premier Wang Qishan on Monday and that there was no gap between the two countries on IMF funding.
Azumi acknowledged it would be difficult to secure commitments from all countries this week towards boosting the IMF's financial firepower and he underlined Japan's long-standing position that Europe needed to do more to combat the debt crisis.
I don't think Europe has made enough efforts on their own, Azumi said. I must urge them to beef up their firewall further. At the same time the world is in need of strengthening IMF lending, so Japan has been taking the lead in coordinating opinions with other countries concerned.
Financial markets are showing increased concern about the debt crisis.
Spain's 10-year government bond yields rose above 6 percent on Monday for the first time since the beginning of December, reflecting worries about the health of some Spanish banks and that Madrid could fail to meet budget deficit targets.
That would raise the risk that the euro zone's fourth-largest economy, which Spain has said is probably in its second recession since 2009, might need an international bailout.
(Additional reporting by Valentina Za in Milan; Writing by Tomasz Janowski; Editing by Neil Fullick)